By: Mark Casciari and Barbara Borowski

In Hakim v. Accenture United States Pension Plan, Case No. 08-cv-3682 (U.S. Dist. Ct. N.D. Ill.), plaintiff filed a lawsuit for additional pension benefits for himself and a purported class claiming that he did not receive proper notice of a Plan amendment that reduced his benefit accruals, in violation of ERISA Section 204(h), 29 U.S.C. § 1054(h).  Defendant filed a motion for summary judgment seeking dismissal of plaintiff’s claim, in part based on a release he signed as part of a reduction in force.  In its August 16, 2010 Order, the Court held that ERISA’s anti-alienation provision, 29 U.S.C. § 1056(d)(1), precluded the application of the release.

Then, on January 21, 2011, in Howell v. Motorola, Inc., 633 F.3d 552 (7th Cir. 2011), the Seventh Circuit held that a similar release was enforceable as to an ERISA claim for additional ERISA plan benefits.  Defendant asked the Court in Hakim to reconsider its August 16, 2010 Order in light of the Howell decision.  Plaintiff countered that Howell did not apply because: (1) Howell involved a defined contribution, as opposed to a defined benefit, plan; (2) Howell does not alter ERISA’s anti-alienation provision; and (3) the release does not apply because plaintiff’s claim did not accrue until it was denied, which did not occur until after he signed the release.  The Court disagreed with plaintiff as to all three points and granted defendant’s motion for reconsideration thereby dismissing plaintiff’s entire lawsuit.

The Court reasoned as follows.  First, nothing in Howell limits its holding or rationale to defined contribution plans, and differences between defined contribution and defined benefit plans are immaterial for the purpose of evaluating the release.  Second, plaintiff’s claim is exactly the type of claim that, under Howell, is not covered by the anti-alienation provision of ERISA.  It rather is a contested pension claim outside the realm of that provision.  A contested pension claim is one that the plaintiff had actual or constructive knowledge of at the time the release was signed.  In other words, a release cannot bar a plaintiff’s recovery of the pension which the plan acknowledged as his entitlement on the date on which he signed the release, but it can bar a claim that a plaintiff is entitled to additional benefits based on an ERISA violation, provided that plaintiff had actual or constructive notice of the claim for additional benefits at the time that he signed the release.  Third, in the context of Section 204(h), a claim accrues when plaintiff was made aware of the plan amendment that clearly repudiated his right to continue his pre-amendment accrual of benefits under the plan — and not when his administrative claim was denied.  Plaintiff’s claim accrued, at the absolute latest, in 2000 when he received a benefit statement explaining he was ineligible to continue participation in the plan because of a new job classification, well before he signed the release in 2003.

This decision reinforces the importance for employers of using only well-drafted releases.  The decision also shows how the courts are defining “clear repudiation” for purposes of selecting the statute of limitations accrual date of an ERISA claim.  The Court in Hakim suggested that a clear repudiation equates with when a plaintiff “knew or should have known” of the alleged violation, and fixed that date upon the disclosure of a benefit statement, and not the denial of an administrative claim or the actual distribution of plan benefits.  One can thus ask — are the “clear repudiation,” and “should have known” standards (and for that matter the ERISA Section 413, 29 U.S.C. § 1113 “actual knowledge” standard) merging and becoming one in the same?  See also Thompson v. Ret. Plan for Emples. of S.C. Johnson & Son, Inc., 2011 U.S. App. LEXIS 16612 (7th Cir. Aug. 5, 2011).